Estate receives 120-day extension to make QTIP election

Plain-English summary

A decedent's revocable trust created a marital trust that paid income to the surviving spouse and held only assets intended to qualify for the estate-tax marital deduction. The estate's return listed the marital-trust property on Schedule M but treated it as non-QTIP property and did not make the qualified terminable interest property election. The co-executors asked for extra time to make the election under Treasury Regulations section 301.9100-3. The IRS concluded that the requirements for relief were satisfied. It granted 120 days from the ruling date to make the QTIP election on a supplemental Form 706.

Ruling snapshot

• Question: Could the estate receive extra time to elect QTIP treatment for the marital trust?
• Outcome: Approved, with a 120-day extension.
• Key authorities: IRC §§ 2001 and 2056; Treas. Reg. §§ 20.2056(b)-7 and 301.9100-3.

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 202001012 Third Party Communication: None
Release Date: 1/3/2020 Date of Communication: Not Applicable
Index Number: 2056.07-00, 9100.00-00
Person To Contact:
------------------------------------ ---------------, ID No. -----------------
---------------------------------------------------- Telephone Number:
------------------ --------------------
-------------------------------------------- Refer Reply To:
CC:PSI:04
PLR-110682-19
RE: ------------------------------------ Date:
August 20, 2019

Legend

Decedent = --------------------------------------------------
Spouse = ----------------------------------
Trust = ------------------------------------------------------------------------------------------
Date 1 = -------------------------
Date 2 = --------------------------
Date 3 = ------------------
Son = ----------------------------------
Individual = -----------------------
Attorney = --------------------------------------------

Dear ------------------:

This letter responds to a letter dated April 25, 2019, submitted on behalf of Decedent’s
estate, requesting an extension of time under § 301.9100-1 and § 301.9100-3 of the
Procedure and Administration Regulations to make a qualified terminable interest
property (QTIP) election under § 2056(b)(7) of the Internal Revenue Code.

The facts and representations submitted are as follows. On Date 1, Decedent
established a revocable trust, Trust, which was amended on Date 2. Trust became
irrevocable upon Decedent’s death. Decedent died on Date 3.

Under Article Second of Trust, upon the death of Decedent, Trust is to be divided into
two trusts, Marital Trust and Credit Shelter Trust. Article Third, Paragraph A, provides
that the trustees shall pay the net income of Marital Trust to Spouse at least quarterly.
In addition, the trustees may pay to Spouse such amounts of principal as the trustees,
in their sole and absolute discretion may determine for Spouse’s support and
maintenance in health and reasonable comfort, or as Individual, in his sole and absolute
PLR-110682-19 2

discretion, may determine for any other reason. On Spouse’s death, Marital Trust is to
terminate, and the trust property is to be distributed under the terms of Article Fourth,
Credit Shelter Trust.

Under Article Third, Paragraph C, only assets which qualify for the federal estate tax
marital deduction shall be allocated to Marital Trust. In any unproductive property is
allocated to Marital Trust, then Spouse shall have the power to require that the trustees
either make such property productive or dispose of such property and reinvest the
proceeds in productive property.

Spouse, Son, and Individual are the co-executors of Decedent’s estate. Attorney was
engaged to prepare the Form 706, United States Estate (and Generation-Skipping
Transfer) Tax Return, for Decedent’s estate. On Schedule M, the value of the property
that passed to the Marital Trust was listed as property other than QTIP property, and for
which no QTIP election was made.

You have requested an extension of time under §§ 301.9100-1 and 301.9100-3 to make
a QTIP election under § 2056(b)(7) to treat the Marital Trust as QTIP property.

LAW AND ANALYSIS

Section 2001(a) imposes a tax on the transfer of the taxable estate of every decedent
who is a citizen or resident of the United States.

Section 2056(a) provides that, for purposes of the tax imposed by § 2001, the value of
the taxable estate shall, except as limited by § 2056(b), be determined by deducting
from the value of the gross estate an amount equal to the value of any interest in
property which passes or has passed from the decedent to the surviving spouse, but
only to the extent that such interest is included in determining the value of the gross
estate.

Section 2056(b)(7)(A) provides that, in the case of qualified terminable interest property,
for purposes of § 2056(a), such property shall be treated as passing to the surviving
spouse, and for purposes of § 2056(b)(1)(A), no part of such property shall be treated
as passing to any person other than the surviving spouse.

Section 2056(b)(7)(B)(i) defines the term “qualified terminable interest property” as
property: (I) which passes from the decedent; (II) in which the surviving spouse has a
qualifying income interest for life as defined in § 2056(b)(7)(B)(ii); and (III) to which an
election under § 2056(b)(7) applies.

Section 2056(b)(7)(B)(v) provides that an election under § 2056(b)(7) with respect to
any property shall be made by the executor on the return of tax imposed by § 2001.
Such an election, once made, shall be irrevocable.
PLR-110682-19 3

Section 20.2056(b)-7(b)(4)(i) of the Estate Tax Regulations provides that, in general, the
election referred to in § 2056(b)(7)(B)(i)(III) and (v) is made on the return of tax imposed
by § 2001. For purposes of this paragraph, the term “return of tax imposed by § 2001”
means the last estate tax return filed by the executor on or before the due date of the
return, including extensions or, if a timely return is not filed, the first estate tax return
filed by the executor after the due date.

Section 301.9100-1(c) provides that the Commissioner has discretion to grant a
reasonable extension of time under the rules set forth in §§ 301.9100-2 and 301.9100-3
to make a regulatory election, or a statutory election (but no more than six months
except in the case of a taxpayer who is abroad), under all subtitles of the Internal
Revenue Code except subtitles E, G, H, and I.

Section 301.9100-3 provides the standards used to determine whether to grant an
extension of time to make an election whose date is prescribed by a regulation (and not
expressly provided by statute).

Requests for relief under § 301.9100-3 will be granted when the taxpayer provides the
evidence to establish to the satisfaction of the Commissioner that the taxpayer acted
reasonably and in good faith, and that granting relief will not prejudice the interests of
the government.

Section 301.9100-3(b)(1)(v) provides that a taxpayer is deemed to have acted
reasonably and in good faith if the taxpayer reasonably relied on a qualified tax
professional, including a tax professional employed by the taxpayer, and the tax
professional failed to make, or advise the taxpayer to make, the election.

In the present case, Marital Trust was created for the benefit of Spouse. Although it
was identified on Schedule M, the return did not include a QTIP election for the Marital
Trust property.

Based on the facts submitted and the representations made, we conclude that the
requirements of § 301.9100-3 have been satisfied. Therefore, the co-executors of
Decedent’s estate are granted an extension of time of 120 days from the date of this
letter to make a QTIP election with respect to Marital Trust.

The election should be made on a supplemental Form 706 filed with the Kentucky
Service Center at the following address: Internal Revenue Service, Stop 824G, 7940
Kentucky Drive, Florence, KY 41042-2915. A copy of this letter should be attached to
the supplemental Form 706. A copy is enclosed for this purpose.

The rulings contained in this letter are based upon information and representations
submitted by the Taxpayer and accompanied by a penalty of perjury statement
PLR-110682-19 4

executed by an appropriate party. While this office has not verified any of the material
submitted in support of the request for rulings, it is subject to verification on
examination.

This ruling is directed only to the Taxpayer requesting it. Section 6110(k)(3) provides
that it may not be used or cited as precedent.

In accordance with the Power of Attorney on file with this office, we have sent a copy of
this letter to your authorized representatives.

                                  Sincerely,


                                  Associate Chief Counsel
                                  (Passthroughs & Special Industries)



                              By: Melissa C. Liquerman
                                 Melissa C. Liquerman
                                 Chief, Branch 4
                                 (Passthroughs & Special Industries)

Enclosures (2)
Copy for § 6110 purposes
Copy of this letter

cc: